The producer-processor milk price negotiations for fiscal 2013 are going far from smoothly. The situation could do serious harm to the domestic dairy farming. Dairy farmers and the dairy industry should work together to raise milk prices as quickly as possible, while improving safety net for the dairy industry.
Designated fresh milk producers and dairy products processors both have been trying to settle negotiations for milk prices before the end of fiscal 2012, but have failed to narrow their differences so far. Considering the fact that prices for several products have gone up this month, milk prices staying the same is a problem which should be solved urgently.
The most important point here is to put priority on the interests of dairy farmers. If dairy farmers have difficulty continuing their business or forced to reduce production, it would adversely affect the supply of fresh milk. Retailers such as supermarkets always assert their say on the pretext of protecting the interests of consumers, but what should be protected is the logic of milk producers.
Milk producers, suffering from the rise in production costs due to the weakening yen, are insisting that milk prices be raised by more than 5 yen per kilogram. On the other hand, because of the recent increase of low-end consumers, retailers are constantly pressing the dairy industry to cut prices, making it difficult for them to pass the increased costs on to retail prices.
Starting this month, higher prices are introduced in various products such as wheat, but milk prices are kept low by the strong buying power of supermarkets. The retail market is increasingly oligopolized by such megastores as AEON Co. and Ito-Yokado Co., while the dairy industry, many of which are small and medium-sized enterprises, is not strong enough to control supply and demand. Milk products tend to become the loss leader in supermarkets’ weekend bargains, as supermarkets preferentially buy from suppliers which offer low prices. As a result, milk, the fruit of dairy farmers’ hard work, is becoming cheaper than water.
We should not forget what happened five years ago. Currently, prices for bottled milk, although they differ according to processors and designated producer groups, are at the level of around 100 yen per kilogram. In 2008, milk prices were raised twice during the fiscal year – up 3 yen in April and 10 yen in March – along with the increase in prices in feed grains. This was made possible because dairy farmers and the dairy industry shared the fear that if domestic dairy farms are driven out of business, the procurement of fresh milk will become difficult.
In the case of today’s dairy farmers, however, their earnings are pressured by the steep rise in the prices of formula feed, stagnating prices of newborn bull calves, rising fuel expenses and electricity charges and so on. Prices of imported formula feed are rising further due to the slumping yen. Since the feed costs account for nearly half of production costs and no supplementation program exists for imported roughage, dairy farmers who have to purchase roughage suffer even severer blow compared with farmers who raise other types of livestock. To raise milk prices is a matter of utmost urgency.
(April 9, 2013)